‘Finding innovative trade funding options’

Trade finance can be described as an imprecise science, according to Menso Kwint, accounts executive for Lombard Trade Finance. The imprecision, Kwint added, stems from the fact that a wide range of tools may all be incorporated under the banner of trade finance – such as direct payments; letters of credit; factoring; forfaiting; structured commodity finance; export and agency finance and trade credit insurance. “However, in its simplest form,” he said, “an exporter often requires an importer to prepay for goods shipped, or provide security for the shipment of goods. Trade finance provides the capital to make the prepayment or securitise the debt for shipped goods.” Specifically designed to fund the purchase of inventory and/or raw materials, trade finance can be seen as a short- to medium-term working capital facility, he said. “It is used in much the same way as a revolving bank overdraft, with the product providing an extra layer of funding that is often crucial to a growing business.” The terms of repayment are structured to match an importer’s extended cash flow cycle – typically at 120 days – to allow the prepayment, shipment and sale of goods to take place before settlement. “Where bank finance does not often consider inventory as security on lending facilities, trade finance does,” said Kwint. “Therefore, often higher facilities may be approved and these funds can be used in ‘conjunction’ or as a ‘substitute’ to a traditional bank overdraft. He also pointed out that his company offered “necessary and innovative trade funding solutions” to SA companies. “In today’s uncertain world of conservative credit lending,” Kwint added, “often a business may lack the financial resources to seize the opportunities they create for themselves. Lombard Trade Finance looks to understand a company’s people, their offering and financial needs and thereby partner with a client through a long-term relationship that makes sense for both parties.”